LLQP Life Insurance · Component 1.1 · 35% of the exam
A client wants to leave a bequest to a charity at death. In the needs analysis this is treated as:
- ASomething insurance cannot fund, since a charity cannot be named as beneficiary of a life policy
- BAn ongoing income need, since the charity will expect the client's support to continue after death
- CA liability, since the client has made a commitment the estate will be obliged to honour
- A capital need, which may also produce a donation tax credit that offsets tax on the final return
Correct answer: D) A capital need, which may also produce a donation tax credit that offsets tax on the final return
A charitable bequest is a lump sum at death. Life insurance is a common way to fund it, and a gift made at death generates a donation credit that can reduce the tax owing on the deceased's final return — a point the curriculum lists under tax efficiency.
Why the other options are wrong
- ALife insurance is one of the commonest ways to fund a bequest.
- BA bequest is a lump sum at death, not an ongoing income stream.
- CA bequest is a wish the client wants funded, not a debt owed.
Exam tip
Charitable gifts at death create a donation credit against the terminal return — a tax-efficiency point examiners like.
Common mistake
Overlooking that the bequest reduces tax on the final return as well as fulfilling a wish.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.